The promise of luring a sandwich restaurant chain downtown prompted Gastonia leaders to approve a contentious building sale Tuesday.

The deal is still subject to an upset bid process next month, should another buyer offer 5 percent above the accepted purchase price. But if that doesn’t happen, Gastonia will sell the two-story property at 109 S. South St., directly across from City Hall and on the corner of West Franklin Boulevard, for $201,000.

The prospective buyers say they have negotiated with Subway to open a franchise of the sub and salad eatery in the ground-level, corner storefront. They would also redevelop the second floor for offices or other uses.

Two city leaders voted against the arrangement because it involves selling the building for less than its appraised tax value of $225,000, as well as the city financing the purchase for 10 years. Opponents think the buyers should get financing through a bank.

“I just don’t want to be in the real estate business,” said City Councilman Jim Gallagher. “I really don’t want to be in the finance business.”

The sale was tentatively approved 5-2, with Mayor John Bridgeman and City Council members Walter Kimble, Todd Pierceall, Dave Kirlin and Brenda Craig voting in favor. Gallagher joined Porter McAteer in opposing it.

City Manager Ed Munn said the agreement offers no risk to the city. The interest rate of 2.48 percent that the buyers will pay over 10 years is higher than what the city would get from any bank investment.

“The city will be holding the note (until the building is paid for),” said Munn. “If the buyers don’t pay us, we’ll get the property back. We really don’t lose.”

Subway guarantee?

Paul Brintley, a vice president with Clark Properties in Kings Mountain, and Allison Pell, an architect and Main Avenue building owner, both spoke to City Council members Tuesday. Brintley’s firm would manage the Subway franchise and Pell would form an LLC to purchase the building and oversee its renovation, he said.

Clark Properties already manages two Subway franchises in Kings Mountain and west Gastonia. Working with Pell, the company tried to entice Subway into opening a franchise at the Main Avenue-South Street intersection. But Brintley said the company was more interested in fronting Franklin Avenue.

“Subway has a track record. Over the last 10 years, one hasn’t closed,” he said. “They don’t just put one anywhere.”

Subway only needs to know for certain what Clark Properties will be paying for the storefront, Brintley said. Once the 10-day upset bid period passes next month and that mortgage rate is locked in, it’s a virtual certainty the franchise will be approved and open in 2013, he said.

If it doesn’t happen, the city will simply still own the building, officials said.

Page 2 of 2 - Payment plan

The city would require a $10,000 down payment, while financing $191,000 of the sale over 10 years.

Two businesses occupy the first floor of the building now. Spindle Center Barber Shop could remain where it is, but Duren’s Jewel Shop would have to relocate to make way for Subway on the corner, Pell said.

“The jeweler could go around to the side (of the building) if they choose,” he said.

Pell’s newly created LLC would pay for utilities and begin paying $3,650 in annual taxes on the building next year, Munn said. The reasoning behind selling the building for below tax value is that its value is expected to increase to $500,000 by the time the renovations are complete, he said.

“You want more vacant properties to be filled downtown and you want more and more private sector investment,” Munn said.

Pell said the economic conditions have made it too tough for him to get bank financing. The city holding the note for 10 years would also aid his efforts, he said.

“This is a real opportunity because it means we can put more money into actually remodeling the entire building,” he said. As a principal partner in the purchase, Pell said he would have a financial stake in using his architectural background to “make the building sing.”

Bad deal?

McAteer said he thinks it’s a bad idea. He compared it to the city lending Nick LaVecchia $10,000 to redevelop the Webb Theater and open Nick’s Steak and Taphouse downtown last year. After LaVecchia pays back the money with interest over 10 years, he’ll own the building. But he has gotten behind in his payments to the city.

“I don’t think the city should be the banker for this organization,” McAteer said of the new proposal.

But Pierceall said the deals are entirely different.

“In this situation, we’re not actually handing anybody any money,” he said. “We own the building and they’re going to be paying us money. We have an opportunity to make a sale. I see that as a huge advantage.”

Gallagher said Pell and his partners should be able to get financing from a bank.

“We’re government,” he said. “We supply services to our citizens.”

Pell said 20 new employees would be hired to staff the Subway. His group will spend about $200,000 to renovate 8,000 square feet in the building, he said.

“I love doing this kind of stuff,” he said, “to sort of make buildings work.”

You can reach Michael Barrett at 704-869-1826 or twitter.com/GazetteMike.